tv Squawk Box CNBC May 11, 2012 6:00am-9:00am EDT
>> i'm becky quick along with joe kernen and andrew ross sorkin and there are a few stories that are putting pressure on the global markets. first up, news of jpmorgan's losses from a failed hedging strategy. that spooked investors last night and again morning. plus there was already nervousness out there about europe amid the political deadlock in greece and banking and bailout concerns in spain. and then overnight, we get weak economic numbers from china and that raises some concerns about growth there. put it all together and take a look at the futures. we're probably lucky that we're not in worse shape at this hour. right now the dow futures down by about 48 points. nasdaq off by 1.8. and the s&p down by just over 5. we'll have more from overseas in a little bit. but let's start with jpmorgan and the spillover effects on the bank stocks. >> let's talk about what joe just mentioned, the shocking can disclosure from jpmorgan late yesterday. the biggest u.s. bank by assets now saying it suffered a trading
loss of at least $2 billion from a failed hedging strategy and that number could grow. we'll have to keep our eye on it. jamie dimon apologized on a conference call with analysts about that trade last might. >> in hindsight, bad strategy, bad execution, obviously the environment. these are mark to market positions. i don't want to make excuses and start talking about market and dislocation stuff because that's just an excuse. >> dimon has been a vocal critic of the volcker rule. we spoke to him in davos and he said you you need a psychiatrist to figure out what the sbents of the sbents of the trades are. here's what he said last night. >> we do believe you need on have the ability to hedge and that volcker allows that. this trading violates the dimon
principle. >> and jamie dimon conceded that those losses were linked to a "wall street journal" report last month about a trader that had been nicknamed the london whale. the trader amassed an outsized position which hedge funds bet against. last month dimon called the coverage a complete tempest in a teapot. as for whether jpmorgan -- this becomes a broader issue for other banks, here's what jamie had to say. >> would this be a jpmorgan specific issue or is there a chance that others also have some losses on similar positions? >> just because we're stupid doesn't mean everybody else was. >> given jamie dimon has called this sloppiness, there are pour men at jpmorgan who could find their jobs on the line. a lot of people talking about he's names this morning. trader in london who put the trades together, he was going
long or at least the view is he was going long on european bonds, corporate names. also michael cavanaugh, and john hoe began chief risk officer and cfo doug bronstein, last month on a call about this very subject said he was, quote, very comfortable with the positions they had. now, let's put this in a little context and take a step back because there's a bigger issue in terms of the washington story and all of the heat that are on banks. the volcker rule today, the vote goes on today, so you have this issue, nobody knows really was this a proprietary trade, was it a hedge willing strategy. this is what volcker was all about. here's what carl levin had to say about this trade. the enormous loss is just the latest evidence that what banks call hedges are often risky bets that so-called too big to fail banks have no business making.
today's announcement is a stark reminder of the need for regulators to establish tough effective standards, implement bank to protect taxpayers from having to cover such high risk bets. let's take a look at the shares of jpn which are falling sharply on that news after hours. of course the big issue is there's always been a little bit of a bump for jp over everybody else because it's jp. and jamie is supposed to be will. >> but does carl levin immediately have to conflate in doctor taxpayer covering losses? >> this is not a situation of too big to pail. the bank covered its own losses. >> so what is carl levin talking about? >> there's a couple issues here. you're right in that this is a company take made $5.4 billion last quarter, $19 billion in the
year, so that is not the issue. the question is the mark to market. if you look at what var was, they have shifted what they thought var was from 67 to 127. how much they could lose on a given day. but it also goes to the whole mark to market day, the idea that they're marking it properly and here he's saying we didn't market properly and that's what the whole financial crisis in many ways was all about. even if this this particular situation is not like jpmorgan is going off a cliff tomorrow. but there is some larger issue and by the way, other banks that may not have the controls to the extent you believe that jpmorgan is it ha does have the controls could have the problems. i'm not suggesting that they are. >> how quickly the bets can go against you. you have to wonder how much of this is because hedge funds were out this, intentionally arrest getting this guy and going after -- >> and they could make it worse. now that they know. >> and just the idea that it was written about the journal had all of this out, probably made them more of a arrest get, made
the trades that had been going against it even more profitable. this is a big problem, but at the same time, i think you look at jamie dimon's -- this is a stumble, no doubt, but dimon is dealing with it and you have to give him credit for that. >> how much worse has it gotten since april 13th? has the position moved or did he not know about it on april 13th shall because he's known as a guy who knows all the ins and outs. >> it looks like the position has move. in six week, you lost $2 billion. that's what this is about. >> he knows it will come back to -- >> it sounds like he may not have money what was happening. >> that's what i mean. it didn't move that much and he's a guy -- you think of him with the little thing in his pocket, tease are the things i've got to do, people owe me
this. the halo goes away for a little while, but this won't -- >> and just one other piece of color that we were talking about before the show this morning, ben white has it in his morning money, jamie dimon taped an interview to be on "meet the press" for this sunday, that interview was taped on wednesday. there is going to be nothing about that. it will be interesting to see whether they play that tape on sunday. apparently jamie dimon called david gregory yesterday to apologize and said when i did the interview, i really can't talk about this. so just a little bit of color on an otherwise very interesting day. sglt guy's position, the trader position, his position -- >> big fat guy? he's not, is he? london whale is -- >> hers calling him from harry pot er -- >> voldemort.
>> like a face on the back of his head. he looks like a snake. pretty scary. >> but that guy's position alone was $100 billion position. so a $2 billion loss, that's only a move of 2%. how do you you get a position built up to that point where a move of 2% -- >> you could also make the argument is we can foortd to have a problem like this happen even though we're not happy about it. that is sort of the larger concept. >> to tie it back to taxpayer dollars i think is a strong man argument. it is going to raise the questions about what would happen in a situation where you don't have a banking -- >> we've seen some of the guys in the house talk about financial issues. they'll go crazy with this. they only need a little bit of info to demogog this. you'll hear people streaming
about regulating that. >> and it's tougher because jamie was one of the most outspoken about this particular issue. >> we'll bring in -- we should have had a camera in makeup when you and stephanie -- you know all the players. have you had dinner with every one of these guys that will get fired? just about, right? >> i know a lot of people. for their sake, i hope they don't get fired. >> i didn't say you were hoping for them to get fired. i'm just saying you have an intimate knowledge of all these people. >> characters in too big to pail. >> stephanie link is director of research and here we are again. vp of strategy at the street. cnbc contributor. one of the first things i thouts of, i mean, i think hedging, if you really are hedging, it's not a bad thing to do. the question is was this the intent here to hedge or to be a profit center? >> you don't really know, but i
do think some of will is because of the flat yield curves. these companies are having a really hard time making profits because of what the fed has done. so perhaps maybe they're stretching a little bit. that's just kind of the conspiracy theory. maybe they're stretching to find growth somewhere and then this goes awry. but you've said it, the headline is bad and the credibility, the reason you pay a three multiple point premium on valuation for jflt p morgan is you because of their risk management and because of hair cellar balance sheet and now you've got credibility issues. so it takes a ding. but from a capital point of view, this does not change. >> one of the things that i heard in make skrup was that the function of the cio entity, there still is an important function that you don't want to take this away from a bank
necessarily. that will be the knee jerk reaction from carl levin. that has to stop. would that hurt? >> i think so. because they've made money in this business before. they were supposed to make 200 million and they'll lose 800 million instead. >> for the cio office. >> that piece, right. and they could lose more obviously. it's impossible to guess. is it a billion, is it two billion? i've read this morning up to 4 billion. >> what would it mean about if the banks weren't playing in the cds arena anymore, if there weren't credit default swaps that the big banks were involved with is this credit default swap, people say this is the insurance market respect it's this, is it an important market or is this just a trading arena for people to make and lose? >> i think it is an important market certainly, but it has a risk to it. that's why again to your guys point of you have a stellar fortress balance sheet, you can handle some of this stuff when
it goes the other way. but this is why banks -- people always think the the multiples of banks can see massive expansion. this is why they trade at ten times normalized earnings because there's really risk here. >> i notice it's so heavy with -- almost like addendum to murphy's law. jamie dimon, the most vocal critic of dodd frank, the day they'll talk about the volcker rule. you can't write this aboutwritn your novel. should you do a novel, by the way, but how do all forces these forces come together today? >> you knew jpmorgan was going to -- you knew there would an stumble at some point, right? i didn't know today was going to be the day. but life is such that there's never a straight line. >> if you had written this in a novel, i would have said that's a little too neat to fall
together like that. >> from a story telling perspective, it is rich. and i love a great story, but i don't love it for jpmorgan's sake or anybody else's sake. p. >> even the -- looking for a sequel from you. i'm always looking every day for something. will doesn't rise to this yet. >> this is not a real crisis. let's not overstep things. ier of investors last evening who said this stock is going down so i'm buying. that's the flip side. >> it's very rare to get the stock at a discount to its premium valuation. they got 15 billion in a buy back that they'll put to work. >> and put to work today. >> probably. tangible book is 34. so there is your down side. that's kind of the way i view it. the problem is portfolio manager unfortunately we own this in the trust, but the problem is what's your catalyst to get this higher and why not go to usb, why not go to some of the regional banks
that may have less exposure here in this kind of situation. not saying there's no risk, but no european exposure. so you have kind of other areas that you can play. so no doubt it's cheap. i think it can stay cheap for a bit. >> art cashin wrote in and says who has the other side of the trade, big winner or spread among many. >> i talked to a number of hedge will funds and i think there are a number of funds who have been playing the other side. >> especially since the journal's article came out? >> and even before that. it was widely known. and i've heard from players even rivals like goldman sachs that said we've been watching this and thinking it's an issue, too. it was a pile on last night. >> was goldman playing the other side of it? >> that, i don't know. >> goldman is always on the other side if one of their competitors is going to have a problem. >> but given the proprietary trading argument -- >> yeah, maybe not. maybe you stay away from it about. >> betting on europe is dicey. jon corzine, was he advising
jamie? it's tough to bet on europe, isn't it? it seems to be very difficult and it can go wrong and it moves -- were we assuming there wasn't going to be a spring swoon this year? >> that was his assumption. but everybody else is taking the other side of the bet and that's why he was calling it a hedge. right? the best way to hedge something is to sell it. that's the hedge, get rid of it. >> we'll see whether this has made it across the pond because that's where we're going to talk to -- thank you. we'll talk to ross westgate standing by in london morning. ross, this is what everybody is talking about, i'm sure. >> absolutely particularly as it's just another bit of trading that's taken place will london. so we seem to create units for it over here. and bank stocks are weaker across the board in terms of advances v decliners, around about 3:2 today as we have slim
losses after slim gains yesterday. ftse 100 up about a quarter of a percent yesterday. today we take a look down about a quarter of a percent. cac 40 down 0.4%. ftse mib is up heights slightly. have a fairly good t-bill auction. bid to cover ratios up. and yields down. but the bank reaction here to jpmorgan, in frankfurt is currently down 6%. was down 7.5% earlier. so just bounced off of the lows that we've seen. some of the other bank, barclays and lehman down 2%, credit suisse down 1%. pbp down about 1.3%. back to you. >> ross, thank you very much. we'll talk to you again soon. when we come back, we have two huge corporate controversies. one about whether yahoo! ceo lied about his educational past. the other about if the personal business of chesapeake energy
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that is the situation we're looking at right here. and once again, you don't want to -- jpmorgan is the biggest huang would bank by assets and a lot being marked down. i guess you shoot first and aim later. people don't know if there's going to be -- you figure some someone is there, others have to be there. they're not on the right side. but we'll see. making headlines, an experimental obesity pill did win the support of the fda panel. the drug is now one step closer to approval as one of the first new weight loss treatments in more than a decade. and you've seen some of the forecasts, like 2030, what are we at, like 42% obese? >> a big number.
>> at current rates, if it keeps increasing like that, we'll be like almost half. whales like the guy in london. you can tie it all to the jpmorgan story today. >> maybe all that yogurt. >> are you going to eat two again? >> i just brought one. i brought a protein shake and one. >> but the protein shake instead of yogurt is better? but you can get away with it. >> all the donuts i've been eating. >> let's talk more about some of these controversies we've been following. scott thompson reportedly telling his top executives that he never provided a resume or any incorrect information to the company. in the meantime, chesapeake ceo continues in the headlines amid a lot of questions about his personal business dealings and how it's impacting the company.
jeff, it's great to see you. >> cky, great to see you. thanks. >> let's start things off with i can't yahoo!. scott thompson selling he did not provide this incorrect information. what do you make of that? >> it's bordering on one of these coverups is worse than the crime type situations. now if there wases any question in might be's mind about about his active role in misrepresentations, that should be cleared up quickly because he's making them before our very eyes. there's a piece in the "wall street journal" recently on a 2009 interview where he's cited -- he's interviewed with a reporter where she asks him about this engineering degree and he talks about how proud he is about this college heritage in computer science and goes on to talk about as an engineer,
which he's not, how he has this great legacy. >> maybe on a train at some point when he was younger. >> it could be. but they get rerailed and he's getting derailed here. >> good one. >> and that he another question at this point, what does the board need to do. >> the board needs to recognize that they should stop serk link t circling the wagons. for whatever animosity they have, it's ridiculous. will board is operating on emotion instead of rationality. several people i know just in the interests full disclosure, about a decade ago, i consulted before this board. i just went in there for a presentation discussion. they were at their peak then and somehow i think they started to believe their myth of greatness and any critiques, they've been circling the wagon since and it's a shame. third point with people like jeff zucker of course one of their candidates, former head of
m nbc universal, perhaps the solution to capitalist flaws in the system is having shareholders who care like their point, they should change out a lot of the board and obviously get an interim in there. this guy trying to say he didn't introduce his resume. he did. he's the one who sought sought the job because the search firm conflicted. he came after them and you can see back at pay pal when he got a technology job, suddenly he layered in this new degree he can't have. >> it seems hard to explain this one away. what about aubrey mclennon at chesapeake. this continues to have another life just about every day, there's new headlines. today the story is that there are a lot of costly liabilities this company has been taking on to try to get cash right how. apparently they have made long term commitments to a number of wall street banks, that they're going to be turning over gas and
oil every month from now through 2022. they got a bunch of money up front, but they have not royed the details of how much it's costing them to do this. >> clearly will is a board that was not on top of their own business. perhaps it would be irresponsible to wave the enron flag because it there's more real that's here than perhaps some of the illusions of enron. but yet you see parallels where once again we have a star-studded marquee board with public officials, even university presidents and things that clearly not doing that home work. people know the industry as we had at enron, freddie mac and some of the other troubled boards. there's no difficulty with the financial literacy or the industry expertise. people are just not doing the job. people don't understand iss, risk management. they would give these guys good ratings, but in fact it's the process. they're not getting the job
done. independent investigations are needed. you look at this, you look at walmart, news corp, of course recently mf global, here it's almost a dozen years ago that we had the enron world com meld downs. we should be past this and yet we're seeing the same problems. at chesapeake, we clearly still need an independent voice and they're being held hostage by the charismatic ceo. >> jeff, thank you very much. great talking to you. we appreciate your time this morning. >> thanks. raising the issue about facebook, that's interesting. coming up, we'll get a live report from jpmorgan in london where everything went wrong for that. plus we'll talk about what the $2 billion loss could mean for financial regulation here at home. numbers... ...and listening to your instinct. duff & phelps finds the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.
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welcome back to "squawk box." i'm joe kernen along with becky quick and andrew ross sorkin. jpmorgan suffering a trading loss of at least $2 billion from a failed hedging to prevent loss. steve sedgwick joins us from outside the bank's offices in london. and you're on the lockout for a great big fat guy, right, to see whether -- london whale in case he shows up today, right? >> someone what i wilwhale-like. we're looking for a big french whale. yeah, the fact is apparently this chief investment office, and i think this is the krubs of
t crux of the questioning, it's about hedging. focusing on the managing the long term structural assets and liabilities of the firm. it is not used for short term profits. a lot of people on our questioning whether the cio is a mark for some form of proprietary activity. why it was someone who is involved in hedge willing activities paid, wait for it, 100 million u.s. dollars. i've traded in these markets and i know a lot of people who trade in the markets. if oor just involved this risk asset, are you you really paid that kind of money as well. so the question mark, is this just the mask for proprietary trading. what is the open position, as well. i know jpmorgan is telling people that it appears to be around $2 billion. but about if will is an open position with the whole hedge fund community, the rest of of the credit market, and they know
you are floundering with a huge loss, what are the chances of crystallizing this position? bearing if mind the original article, and this is such a slow burn story, it came out from a guy called gregory zuckerman on the 10th of april. i spoke to him this morning and i said this has been such a slow burn story. he says what can we do, we put it on the front page of the "journal" and it's taken this long to gain momentum. so the questions are multitude. when did treasury find out, what kind of risk management do they have, did jpmorgan knmight go kw anything on 13th of april. but the trader remauvins aloof. >> it might be a big white whale like moby. >> i think he's a french whale. >> oh, a french whale.
you get the caviar this guy. >> so we understand. >> thanks for that report. we'll icontinue with this conversation for the possible regulatory ramifications. let's turn to laura unger and jake zamanskn. thanks for be here. laura, i'm curious when you think about the regulatory implicatio implications, volcker has not been completely written and we don't know how it will ultimately going to be effectuated, meaning how the fed and sec will look at the issue. how will this change things. >> well, it will certainly raup the discussion around risk and proprietary trading and what it means. but it sounded to me from the limited facts that i know that this was a macro hedge in favor of the economy and the economy has been slipping. and as the trader tried to
unwind his position, he started losing money. but in terms of the actual implementation of volcker, i think will they're still sifting through the comments at this point and behind the scenes with the examiners, the banks will start coming up with a plan, a good faith plan of compliance with volcker. and i think they'll begin parsing through their pop trading books and their market making activities to figure out which bucket those activities go into. >> does this this trade seem like a proprietary trade to you or do you look at this and say this truly was a hedge and therefore this is something that would be acceptable under volcker? >> about if it is truly a haenlg, which is sounds like it was, or an attempt to be a macro hedge, it comes out of the chief investment office, which i think would be a horizontal look across the entire firm. a big hedge against the net
position. so if, so then, no, it wouldn't come under volcker. >> when you think about mark to market and part of the problem is that it wasn't marked properly, that was reflected in the call that jamie discussed,. >> we've seen mf global blow up, we've seen rogue traders at socgen, at ubs wipe out a whole quarter's worth of earnings. >> but this was not a rogue trader. >> you can have rules, but about if you don't have good compliance people, good supervision, this will happen all over the place. it could happen at other banks. i think that jpmorgan and these banks are too big to trade. >> let's go back to this one second. is the idea -- is your problem with the trade itself, this clearly was i think a good faith trade, meaning that the raider who put these trades on thought
that these names were going to go up and was on the the wrong side of it. to me it becomes how they were marked. we saw the v.a.r. >> it highlights the level of complexity in the market. and in these trades. and there are most likely people looking closely at the activity, but maybe never fully understanding the true risk exposure. >> are they then back it on the idea that we're not the too big to fail, about you too complex to trade? >> well, yeah, too so he physicality indicated to regulate and maybe the compliance needs to step up accordingly. >> we're talking about the largest bank in the united states. this is shareholders money, depositors money. if jamie dimon wants to be a hedge fund, go up to connecticut, work with phil falcone, take those risks, but not at a large commercial bank.
you have these little guys shareholders that are scared to death to get back into the market when they see something like this. where does it end, how are they going to invest with any kchd wh confidence when they see supposedly the best risk control bank have this kind of loss. it could be much larger and it's just scary to the investors that i speak to. >> what would happen if glass-steagall came back? >> both of them? >> exactly. would be amazing. but small shareholders might as well sell their jpmorgan because no bank will ever make money again. >> old school they used to lend money, they used to do prudent things. >> andrew wants to go back to cds and savings accounts. >> no, not necessarily. i think there is a role for some of this, the question is how much. >> will we be able to raise capital, compete globally, do all the hinges in a modern economy if glass-steagall came back? >> i think we could. i'm not suggesting we do that but we have to have real
regulation so this doesn't happen. when i invest in a jpmorgan, i'm not assuming i'm taking this kind of a risk. i think i'm taking a modest risk that the pirm is under control. this shows that dimon doesn't really know what's going on in the coal mines. and i think we got to have banks that have real controls and if this is going to happen, this type of proprietary trading -- >> this is being overstated a little, don't you think? >> i think i respectfully disagree. i think jamie dimon knows exactly what's going on. i'm not sure what happened in this particular instance. but knowing him and his attention to detail, i think all of us are more surprised than anything that this did occur. >> so if you look at what's been happening on a broader scale, though, jamie has been the most outspoken of all the banks ceos about the regulation. he won't be able to be going forward. >> his general counsel actually supported volcker last week this
a meeting. so i think it means he's immore ittal like the rest of us. regulators make mistakes and bank executives make mistakes. everybody does. but that doesn't mean that you you need to go in and overregulate. regulation is not always the answer to these kinds of problems. >> but i wonder how that argument will play out right now. >> in the plipolitical arena, i layout horribly. it just lends more fuel to the fire around regulation and i told you, this is exactly what we need is volcker and we need to control these guys. we need to rein will them in. but in point of fact you have multibillion trillion balance sheet that you need to manage. and there has to be a way to do that, take on some risk, but not do it to the detriment of shareholders. >> if he's just going to fire a few people that were this this control and bring in new people, we have to make sure those new folks are playing by rules that they're being careful with the
risk, otherwise we could have this happen again. >> although in this situation, the bank is going to be able to cover it. $2 billion is a loss they can handle. we're not talking about getting in to taxpayer dollars. sometimes businesses go well, sometimes they go badly, but this will be covered in-house. is this not a situation of going back to the too big to fail. >> exactly. and that trigger will be answererable to jamie dimon, which is much more terrifying. >> the loss could be bigger and we have to make sure that it's contained, it doesn't happen again. >> but you can't write up regulation that does that. you can't control every risk through regulation. you have to do it through good management, good risk management, and understanding what exactly is at stake with these transactions. >> laura, jake, thank you so much. interesting conversation this morning. we'll be talking about this for quite a while i imagine. >> yes, we are. and if you have any comments or questions, e-mail us at squawk
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there are red arrows on wall street. right now dow jones futures about 46 points below fair value. it's coming as you are waking up to some news about jpmorgan. if you haven't heard already, we have ceo jamie dimon made these comments last night. >> in hindsight, bad strategy, bad execution, obviously the
environment. because these are mark to market positions so obviously that. i don't want to make excuses and start talking about market and did it is location stuff like that because that's just an excuse. >> again, this was an unusual conference call. he was talking about a $2 billion loss that the bank is now expecting because of some trades out of london. unusual to the extent that not only was that loss there, but the bank actually held a conference call to talk about this, cleared things up with analysts and with reporters. something people will be talking about, trying to figure out if there's an impact, how long it will last. >> $2 billion trading loss. >> $4 billion after the loss. >> right. but if you could -- you could hear that $2 billion loss and it sounds almost like a $2 billion loss. >> no, not for the -- $2 billion trading loss, but the bank still expecting -- >> carl levin -- some people are going to -- >> you looked at the camera like
is the camera on. >> no, i looked over because i was thinking about one way of looking at it, that you're going to see that not everybody is intimately involved with the details and it can be used for a lot of really sensationalist and inflammatory language to stir things up. >> it's a stumble and jamie dimon was the first to admit it. >> and you came hear it about in his voice. it's like it's the worst thing that can happen, but it's life, take responsibility and we'll move forward. but let's get to the trade pits of chicago. bob joining us from the cme. even in it chicago, even though you guys are -- no more pork bellies which is disappointing to me, but i'm sure that financials are on everybody's radar with this, right, bob? >> yeah, how would jpmorgan affect pork bellies. >> a good point. what happened? any way, so which instruments
are -- it's more of a -- it's just interesting. it's not really going to affect anything you're doing today, is it? >> well, actually is. i was doing some analysis late yesterday because ever since the big move in january, the big move up in the equities, i changed to kind of a buy the dip mode from just an outride long mode in the s&p. and i was looking for places to buy dips and i was looking at the financials. i was trying fto see when the financials would bounce because they've been sideways. and as soon as i hear the news, my reaction is really, we need this now on to which everything else? but having said that, becky is talking a lot of sense in the background as i was listening to the last segment because this is a loss that jpmorgan can handle. this is going to be another speculator conversation. they'll be talking about the speculate tors in the nation's largest bank andle be blamed on the the speculators. but the large run up in the s&p in the first quarter, nobody talked about speculatorses.
so now you'll see the speculatorses selling out of the s&p position, the hedge funds selling out of s&ps especially on a friday, looking for plays to places to buy the dip. that's what's going to happen with this. this is a think madab manageabl large bank. it will hurt because of the timing with greece still into on, with the economy slowing, the sell in may coming in. so we'll see a further dip than i thought we would. i thought you could buy the s&p 1340 to 1333. now i'm looking more at 1301, but i still think u.s. equities are the place to be because you need to generate returns and corporations are large profits in their balance sheets. >> all right. not a great time for this. >> i think i covered it all. >> you you did. nothing else to say. just you got the beard going. pretty cool. >> still got the beard going. it's a disguise. >> yesterday the dow closed up modestly after six down days.
this news has it looking for red arrows again today. what's the real sentiment just about how people feel after these declines and what they're watching play out in europe? >> again from a trading perspective, you saw exactly what's been happening. you saw a week of selloffs and people covering positions on friday. we just don't hold positions as long as we used to, 2005, 2006, 2007. so you you see these reversals of the week's move on friday all the time. now instead of that, you're going to see new shorts and you'll see some of the bigger picture longs covering, as well. so we should see red arrows at the end of the day. but once this shakes out, i was impressed by jamie dimon yesterday, by him saying we screwed up, our fault, we'll take the hit, there's going to be people losing their job, there will be bonuses that are hurt, but we'll be okay. and that's the sense i got from him. again,s of just bad timing for a bad loss. but losses happen. controlling this risk from a per
spec i have of we want to invest in stocks that never go down, everybody stop it. it's not going to happen. >> all right, bob. thank you. have fun. happy friday. >> you, >> all right, bob, thank you. happy friday. >> this morning, as we head to break, here's what jim cramer had to say about this morning's top story, jpmorgan. >> this jpmorgan is jarring, as jarring as it is last night when we had cisco saying things are bad. when jpmorgan has lost control of its business and that's what this is egregious losses, i'm quoting jamie dimon, the ceo, banks, other than traditional banks that make loans to you and me and securitize them may be too dangerous to own. here's the thing -- every bank is going to be down tomorrow. when you're throwing them at away, you should be looking at a
bank like wells fargo. jpmorgan, jamie dimon, down right embarrassing. kicking myself to think that he was any different from the other guys. you ready? we wanna be our brother's keeper. what's number two we wanna do? bring it up to 90 decatherms. how bout ya, joe? let's go ahead and bring it online. attention on site, attention on site. now starting unit nine. some of the world's cleanest gas turbines are now powering some of america's biggest cities. siemens. answers. who have used androgel 1%, there's big news. presenting androgel 1.62%. both are used to treat men with low testosterone. androgel 1.62% is from the makers of the number one prescribed testosterone replacement therapy. it raises your testosterone levels, and... is concentrated, so you could use less gel.
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guy, this weekend is mother's day. you ready for happy mother's day to your wives. you may not have known that this is actually the weekend that is one of the top attendance times for church for people all over the place. pastors say this ranks in the top three. number one is easter, number two is christmas, number three is mother's day because moms tend to say let's everybody go to church. is number four father's day you think? >> i don't know. >> no, no. father's day falls off. father's day is go play golf. i thought that was interesting. moms say go to church, dads say play golf. >> 1-800-flowers. >> do you do flowers? breakfast in bed or anything? what's the mother's day routine? >> i'll tell you when we're not telling the world. normally you wouldn't buy someone -- it's not a vacuum cleaner.
normally you want to make sure it's a romantic gift. there's something i want to get her that it's not like jewelry but it's sort of something that i need to get. >> it's not a bowling ball? >> no, it's not a bowling ball. i could see your disappointment this morning. >> when was that? >> i saw a new jersey person won the obama dinner raffle where you get to go to clooney's house. i read it and you're not new jersey. >> it's not me. my wife would like to go to that. >> i'm sure. >> but i was just disappointed. i know that you were disappointed, too. i don't know. you probably have something to do that night anyway. >> i'm going to be washing my hair that night. coming up, the story of the day, jpmorgan reporting a $2 billion loss on its trading book. we're going to talk a lot more about that after the break. [ male announcer ] introducing a powerful weapon in your fight against lawn weeds.
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the big big stumble. >> in hindsight, bad strategy, bad excuse. >> jpmorgan takes a huge loss on a million dollar bet and could lose more. >> checking in on a man who has his hand on a wide course of businesses, james tisch. >> and raising the stakes at the players. >> the shot went past the hole. he just revisited the hole. >> the breakdown on the favorites of this star-studded championship. "squawk box" begins right now. ♪ the best things in live are
free ♪ i want money, that's what i want ♪ >> good morning, everybody. welcome back to "squawk box" on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. yesterday the dow was up by 20 points. thorn t this morning the futures are indicated down. >> and the london whale gone belly up, jpmorgan chase, ceo jamie dimon saying we will admit it, we will fix it and we will move on. mary? >> the banks don't like this ne news. it might muzzle the big bank's
lone public spokesman, jamie dimon. he said they resulted from poorly executed and badly monitored trades, trades done in the murky world of the whale, their chief investment office. on a conference call last night dimon saying the losses stemming from the firm's move, betting heavily on improvement in campaign finance refo corporate debt. >> i'm telling you it morphed overtime and the new strategy meant to reduce the hedge overall made it more complex and more risky and was unbelievably ineffective. >> a forecast for $800 million loss in its corporate segment.
losses could total $1 billion by year's end. the firm saying its earning -- it could earn around $4 billion this quarter, close to analyst estimates. on the call dimon acknowledged news report about outside trades and credit derivative by the analyst analyst neck named "the whale." >> he is still can the firm, as is drew, the head of global cio. the bank has put together a team for legal audit. when asked if the trades might violate the pending volcker rule, he said he didn't know but they did violate the dime on ru.
dimon responded just because we're stupid it, doesn't mean. >> else is. other banks are likely to be worried because of the aforementioned pundits could use this call as a bludgeon and a recent called for tighter restrictions on trades. there is concerns about the reputational risk not on for jpmorgan but also for the banking industry as a whole. of course it's been under fire ever since the financial crisis and this could give them more ammunition. >> do you think these are proprietary trades or do you think they're truly hedges? >> this is the question. people say this is not a cloont facing business, all bank does this, they do have a portfolio where it's the excess of their deposits from their loans, they use this primarily to manage interest rate risk a lot of times, credit risks. some banks may not be as -- or may not embrace that as much.
but this is done by all banks. it part of the business. and because it isn't client facing necessarily, some say it wouldn't even fall under volcker. >> right. but if you saw the banks today, it might not be because you think that they have some varied problems as well, it might be that the evidence is adding up that a lot of their activities are eventually going to be even more constrained than we previously thought. >> that could be one reason. the other thing is why would you buy something where you really don't know what they do? aren't you supposed to buy what you know? >> it's the market-to-market aspect. if jamie dimon, who we all think is mr. risk management, mr. on the money, on it every day. and if they can't get the marks right, that's the question, who can, right? that's the question.
and you watched -- it jumped two fold, doubled. that's a marking issue. >> let's bring in an analyst who has been following all this. jeff, what's your take with this? how surprised are you and what do you do today with these stocks? >> i'm surprised from the perspective we didn't see this coming. from the more macro perspective, vesting is a risky business, even for jpmorgan. when your business is taking and managing financial risk, you're going to have losses sometimes. in the overall scheme of thing, a $2 billion loss for jpmorgan, they earned over $5 billion last quarter, they have $140 billion of tangible equity. it's not a threat to them, let alone to the threat to the system. it going to give ammunition for those looking for a strict interpretation of volcker to come after the industry more.
if that's what happens, at the end of the day there's nothing more proprietary than making a large cni loan. that's what these banks do. you can't regulate them away from taking risks without making banks go away. if you make banks go away, we're going to be bartering cows and eggs with our neighbors and the economy will be kind of destroyed. i think the volcker -- p pro volcker crowd will jump all over this. hopefully calmer heads will prevail. >> that stock looks like it going to trade down by at least 2.50 today. what's the premium that's built in for jamie dimon as the manager? and where do you think the stock should stand at this point? >> well, the premium is
two-fold. one is certainly they got through the crisis probably better than anybody else so they're carrying a bit of a risk management premium. also the business they have are generating a lot more earnings power than most of their competitors. part of the premium is the fundamental performance today versus back in the crisis missing risk. but certainly this is going to kind of put a chink in the armor and have people start questioning. quite frankly, it should have people questioning their risk management. this def in tinitely has to imp their faith. >> does it impact the premium afforded jpmorgan? >> i don't think it removes all of the premium. it will remove some of it but i don't think it removes all of it. end of the day, jpmorgan is still a big bank and it trading at a discount. if you looked at like the top hundred banks -- i don't think it's going to give up its total
premium to the b of as and citigroups and goldman sachs of the world. how long it takes for them to come back will be unfortunately a function of the market. we know as of yesterday this trade had a $2 billion, you know, loss on it. the trade's still on. they haven't removed the position. it could go against them or it could go for them in the weeks to come. >> is it likely to go against them now that they're even more exposed and people know more about what's going on there? >> yeah, well -- i mean, in addition to that, i used to trade and the old rule is your mistakes never go your way. they could but they never do. the chances are it's going to generate more losses going forward but you really don't know. >> is there any other institution we should be watching? has there been any scuttlebutt or speculation you've heard about another institution that's taken similar bets? >> no. i mean, the cio thing at jorg and, the size of the positions
they were taking had people scared. as far as them taking a loss on it, it's not something we were hearing grumblings about even yesterday. coming into yesterday, i wasn't hearing grumblings of losses for jpmorgan. >> you made some interesting points about like commercial, industry loans. the banks are in the business of taking risks. they might give solyndra a couple million. who knows. can you make the case that means they should able to long and shot positions on europe corporate debt? what does that have to do with the banking business? >> jpmorgan does not just lend to u.s. residential entities. they have big, international corporate lending positions. >> so you're saying this could
have been hedging some of the positions that they've lent to there. >> that could be a part it have. there aren't perfect hedges for many things out there. they have an influx of deposits, especially after the crisis. you can't just put that in your mattress. so they have to put it to work. you put it in a securities portfolio. my guess here is they had some kind of a basis risk issue where they thought they were, you know, hedging the credit risk of a portfolio or something that would trade with a high correlation of a portfolio and that wound up not happening. >> we have to go but do you buy the stock or steer clear? >> i would probably let the dust settle a bit this morning but i suspect this is going to be a nice buying opportunity. jpmorgan has a big buyback authorization which has not diminished because of this. i wouldn't be surprised if they're big buyers of the stock
today. >> jeff, great talking to you. >> if you have comments, questions about anything you see here on squawk, shoot us an e-mail. up next, energy policy, corporate taxes. the fed. there's almost no subject this man can't tackle. we'll welcome james tisch when we return. >> monday on "squawk box," former vice wear bob lutz and author of "the accident an millionaires" talks about facebook's highly anticipated ipo and how you can make money. that's monday right here on "squawk box."
>> hi there. >> don't mind us. >> i told you -- >> i love this whole jpmorgan thing. you're very energized. you were up late. >> it's an interesting story. >> it is interesting. i just asked you if you could write a volcker rule that will allow banks to do what they need to do but that would help -- >> it's complicated. i got an e-mail from a friend in london who was suggesting if you
move to basel 3, it would be harder. >> businesses range from oil to insurance to hotels. he is jim tisch and we're going to talk about all kinds of things, the ceo of loews corp. you have ever said the volcker is good or bad? >> my general thought is that the volcker rule is not particularly good. if you look over the years, the banks have generated an enormous amount of profits from their trading. yes, every once in a while like last night they do report losses from it. but if you look over the span of time, that's where they've really built an awful lot of the capital. that's been the source of their capital growth. >> do you feel comfortable with an international standard like
basel 3? we do things differently than french banks, don't we? >> it good to have international standard, though, no? >> depends who's setting them. up till now we've been able to set our own bank rules and that's worked fine for us. >> would you like any european labor laws here, if we're going to deal internationally? >> and if we want to change our rules, do we want to go to some international body to change it? >> there could be a global financial tax on transactions. >> what's happened overnight with jpmorgan, even though it handled completely in house, they're still going to have a profit on the quarter, even after this loss, it is going to be red meat for politicians looking for regulatory oversight. >> absolutely. yes. >> so how do you explain that in this scenario in how do you talk through this point? >> i think the point is that trading can be volatile and what we saw -- what we've seen with jpmorgan is that, yes, they did have a loss but in no way does
it threaten the safety and security of the bank, that they -- we've heard they've got $15 billion in a share repurchase program. so maybe now it's 13. but make next quarter they'll earn $2 billion in their trading rather than lose $2 billion. banking and trading is not this business where earnings just go progress elf up. it's trading. it's trading. >> we're going to talk -- i mean, chesapeake, there's big news about that today. and loews, you could probably have financial engineer or something? >> what do you mean by financial engineering? >> that's become a pejorative. >> i man doing more than just drilling and providing oil equipment.
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. happy friday. we have red arrows across the board. the dow would over -- open down. leaders of several party have been meeting but so far they haven't come to any agreement. and the red ink continues to flow for japanese electronics companies. panasonic reporting losses of about $5 billion. the lack of new blockbuster titles apparently cited as a key reason for the problems. coming up next, we're going to get behind the fortress wall as
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welcome back to "squawk box." in the headlines on this friday morning, the markets are absorbing that news of the $2 billion trading loss suffered by jpmorgan chase. ceo jamie dimon calls this loss egregious but he told the conference call you can't jump to conclusions as to whether this is an industry-wide program. >> is there a chance others also have losses on similar positions? >> just because we're stupid doesn't mean everybody else was. i have no idea what other people are doing. >> dimon says the $2 billion loss could grow by as much as another $1 billion. also, nissan saw quarterly profits grow by 33%. and china's chick growth expectedly slowed in april. industrial out put rosely 9.3%. falling short of expectations,
retail sales in bank lending. back over to you. >> thanks, becky. jim tisch is here, he's's loews -- wait. i thought you were going to say -- >> because there's the hardware store. >> there's also a hardware store spelled differently. chairman and director for dimon offshort and form are director of the federal bank of new york. so looking at the commit rye now, i think your take is there was some calm and now we're back into a period of worry based
position. >> remember all the wrangling took all the attention -- >> there was already a lot of uncertainty and it added to it. >> well, this fiscal cliff is the summer of '11 but on steroid. not on do we have an acrimonious presidential race, but we also have the sequestration of the military and domestic spending funds and we have the end of the bush tax cuts and we also have the social insurance taxes going back up. so the expectation is that -- >> i think you have some obamacare stuff kicking in, too, huge taxes, right? >> so the expectation is that all of that stuff is worth about four points of fiscal drag on the economy. >> and we're at two. >> say again? >> we're at two, so that would bring us to minus two.
correct. nobody's -- it's most probably going o teak place after the election, in a lame duck session of congress. if all depends who gets elected president, who controls the house, who controls the senate. these are make or break issues for both parties and there's going to be lots and lots of brinksmanship. markets don't like brinksmanship. >> do you not take the improving employment rate at face value? in the notes i'll see you say you haven't seen any real improvement in the employment picture. we've seen it drop from over 10 to 8.2 or whatever it is. the trend has been moving in the right direction, no? >> number one, it's improved because more people have found jobs. but, number two, and as importantly, the unemployment rate has improved by people dropping out of the labor market.
so it hasn't been as robust -- jobs -- the jobs picture has not been as robust as the unemployment rate would indicate. >> and you think that -- it not going to improve that much from here on out, given that the fiscal cliff is coming. that's right. we'll we have an interview you're ready for, right? >> our next guest, one of the nation's only publicly traded hedge fund company, mook is principal at fortress. they have $46 billion under management. given the news of the morning around jpmorgan, i wanted o get your thoughts real quick. >> listen, it not good. i think jamie dimon was pretty straight forward that we screwed
up. my bigger concern is you're restating in essence your earnings because you had a var problem or a problem calculating your var. so it completely plays into the volcker rule, more regulation, less proprietary trading camp. as that battle get pushed back and forth and jamie has been on the offensive saying banks need less regulation and it might be weight on the market. >> you're in the hj fund world. do you know who was on the other sides of all of these trades? cds positions coming in the morgue and group, that takes a tremendous amount of proprietary risk. is it a hedging business or
proprietary raiding business? for them to miss their var numbers by 50% is a little surprising. you know, it tells you that these are scientific calculation. there's a loot of art in you calculate that strain down has been coming straight down. >> now you are are in the pro pry tray banking business make you worry, does it chang your thought process? how safe do you have think the system is, of the firms that are in your business? >> it's $2 billion whom think is
going to so the not a giant hit to jorg '. what is more important is the fact that this kind of got the var wrong and had a qom kbak mid quarter and said, hey, tradition ant fortress and a lot more of the market share trusts. you were making macro bets, jab p was making macro bets. i'm cure our. the prrch elections sent a nice message e -- we need to focus a little more growth and not just
austerity. but the break there's now a significant chance that greece could leave the euro. they could vote themselves to say that leading moment. a lot of the european planning make verse been planning and planning and planning for the vent aol reality that anyone proopd. you'd a rag tw banks in europe or you think that's the waegs support banks here as well? >> it any could there's all kinds of issue, the target two balances between countries in europe, right now they're just accounting, book entries but there's $680 billion accounting book entries between the countries that have and the
countries that are borrowing. it's not seen as debt but overnight that rolls that could won to debt. so you'll see capital night out of banks. and it start cracking down the euro. that stops call tap from throwing. >> so what happens, though, if the authorities in europe once again try to save greece and they give greece the money that it needs, greece no longer has the austerity programs it was supposed to have and what messages does it send then to spain and italy and portugal and theser p other companies. how does europe work it out when the streets want more but authority want austerity. >> ironically all the greek himself to do was just try.
because of of the down side risk of someone leaving the euro is so high, they're going touk talk tough but they would have let the greeks snake by without the span yards have mad. >> i think the corse -- but we want to you see the that reform start happening in the right direction. >> would seethe of these companies be better off with their own currency is that could drop dramatically so that their recoveries could kick start sooner? >> we're going to see the greeks probably vote on that. it is the $64,000 question. entu tifl you'd like to say yes because you could kick start your economy. all of a sudden what does it
mean to greek citizens who no longer have free access to work in the rest of europe. you're ostracized now from all of the rest of europe and so the transition costs over wait the benefit cost. it's that -- you know, in a perfect world with no transition costs, i'd say yes. but the transition costs i think are staggering. >> so the money question -- by the end of the year will the greeks still be using the euro? i would have say 90-ten, given that manage commodities in particular and how do you this gold right now. >> gold is interesting because it's the perfect if you go of war betweenin flags and deep makes.
it was trending up to almost bubble-like levels and then it's come off. what i've noticed is the volatility of goal has picked way up. it's a left profitable trade because -- the potential profit are the sen tram banks going to be successful n the word and media run or the deleveraging process is going to win out. so gold is kind of struck in a ring. my old is on a 20 years or 40-year basis it's as pensive i've been. but right now we have no position. it's something we watch insesant little by.
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with xerox, you're ready for real business. the fbi launching a nationwide ad campaign against corporate espionage today. it's a reflection of a growing concern that corporate espionage is eroding the country's economic edge. eamon joins us with more. >> this is something the fbi has never done before, a nationwide advertising campaigns, all targeting corporate espionage. the fbi telling me yesterday that they think about $13 billion in american corporate secrets have been stolen by foreign agents just in their
current caseload alone. i spoke to the head of the fbi's counterintelligence division yesterday and he told me what those foreign spies are looking for. >> they're looking for everything from price lists to the latest pharmaceutical research, marketing strategies, new product information. typically whatever you view as your crown jewels at your company is likely the farg et of morning economic espionage. >> the fbi told me there are several thing togs look to when looking for potential insiders because that's where this threat is coming from. take a listen. >> there are warning signs and indicators. they include everything from that employee who is working very late but really doesn't have to, coming in on weekends but really may not have to. trying to ask a lot of questions or access a portion of the company or some of the proprietary data that he really
doesn't have a need to see. >> you can potential bot going through divorces, with alcohol problems are some of of the most likely types of folks to become ensider spies run rabble to recruitment. back to you. >> thanks so much for that. appreciate it very. coming up, ian poulter shutting one of the best rounds of his career while tiger finds himself in danger. if you could see joe trying to give me a hard time. we're going to talk golf with rand aal sh-- randall. >> tack a look at jpmorgan this morning.
arena. it's going to soar, it's up $3.75 to $7.41 on prospects for that obesity drug. you did a great job, andrew. you know it's tiger. it's not from "winnie the pooh," right? >> yup. >> and you got chamble right. i've been looking forward to talk about this. they call it fifth major, the players championship, the stakes are high. the players vie for the top spots. i have a lot to ask you. i look forward to our segments. you put 17 and 18 together and everybody's waiting for sunday, right? it's so much fun. >> well, yeah, absolutely. 17's a great stage. you never know what you're going to see there. angel cabrera made a nine. it is unusual for angel cabrera
but it's not unusual to see catastrophes unfold there. i think people set around there kind of like they're waiting for a train wreck. >> the record's at 12, isn't it? someone got a 12? >> i think that's right. there's a lot of heart ache. there's probably been more millionaires cry on that hole than any other place in the world. >> i heard johnny miller say when guys shoot 7 under the first day, a lot of times 7 or 8 under ends up winning it. i think about this ian polter guy. he's a cool customer. they point out he did not grow up playing country club golf. i know ian. he is a cool guy. he should have been winning more. i watch him in ryder cup and you wonder why he hasn't won more. he always contends in major. >> he does. he's kind of a confrontational guy. i don't mean in a bad way.
he's good for golf. heap says some pretty darn controversial things. he's only within one golf tournament in the united states and that was the match p he's an in-your-face kind of guy. each does struggle with his ball striking from time to time. he'll hit some loose shots from time to time. that's sets him back when he's in con tngs. 2009 -- contention. it's a long road for ian coulter to close this thing out. >> i think we have butch harmon coming on on the 31st. tiger, here we go again. we expect a lot of him. i saw phil hit one in the water where no one's ever hit it in the water yesterday. it's very strange. but your point now is that he should go back to butch and fire sean foley. is that what you say? >> i said that the other day and i was kind of saying tongue in cheek because i don't think butch would have him back to be
honest with you. butch is quite happy with the stable of players he has. you ask him, i guarantee you he'll say, no, he doesn't want the headache. when i say butch, i mean any type of teacher who can go to a more simple method. of the hundred top teachers, there's, i don't know, 90 of them who are a lot less complicated than sean foley. i'm not saying sean foley doesn't build good golf swings. right now watching tiger woods play golf is pretty painful. it looks like what he's doing is complicated. >> give me some dark horses you think will be in the running on sunday. >> there's 11 players that shot 68 yesterday. among them more control players like a matt kuchar, adam scott, that long putter making it from everywhere. bill haas. if you're looking for a dark horse, this guy pops up all the time or i should say he pops up
rarely but when he pops up, he can handle the heat. ben curtis won the 2003 british open. we haven't seen a lot of him and pops up on the radar at the texas open and plofs the field away and wins there for the fourth win of his career. this golf course demands so much of the players. he's a great dark horse with an opening round of 68 i think. >> kuch, he's been in contention every we're, right? >> he has this beautiful -- he punches out shots -- >> that was the masters. he was in it all the way to the end. i thought he might win at one point. he had a chance for sure. he's the player that you don't really talk about him that much as one of the best players in the world without a major championship because lee
westwood and luke donald get talk about so much in that regard. but matt koocher is not that far behind. ies and maybe it comes through this wind. >> i saw duke donald. what's happened to him? he's got the smoothest stroke in the business. >> that's what this course will do to you. you come down here and play this golf course. will put some demons in your head. >> i hear you. i get demons on a pitch and putt. >> i got two very quick unrelated questions. and that is number one, will there be any competition to the golf boys? and, number two, will they come out with another song? >> well, i hear there's a little bit more poll tex involved in the next song but i don't see anybody competing with the golf boys. what have they had, 4 million hits on youtube?
not on because of musical ability because they're extraordinary there. but golf ability. my goodness, these guys are ama amazin amazing. i've had a lot of fun watching they. >> if someone calls in sick or something, you know where to find me. >> come on out i want to see your nerves. >> no, i'm not going to play. i'll be there to talk. i'm the same way. >> come sit down. we'd love to have you. >> all right, brandel. see you later. thanks. >> you're going to watch this this weekend, right? >> very closely. in global market headlines this morning, the leaders of greece's once dominant political parties are making their final evident today to form a coalition and avert a new economy. also china reporting lower output data, suggesting economic head winds might be stiffer than
originally thought. the iea saying oil prices likely to stay high, despite a dramatic improvement in pricing resulting in a big build in stocks. >> bill: still chris whale length will talk about that. and you can't get it if you live in argentina. why it's causing such a ruckus. the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services.
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the sweet spot that powers sound decisions. duff & phelps financial advisory and investment banking services. jpmorgan's big blunder. chris whalen will break it down. >> and we're going to ask the company behind siri, the voice of apple's iphone. >> and breaking economic data. we'll get the latest read on
inflation with producer price numbers, the ppi, at 8:30 a.m. eastern. the third hour of "squawk box" starts right now. >> play "shake, rattle and roll." ♪ ♪ ♪ get out of that bed, wash your face and hands ♪ >> welcome back to "squawk box." our guest host this morning is jim tisch, the president and ceo of the loews corporation. we've been watching the u.s. equities and they're down by 38 points. the nasdaq has turned positive, up by just about 1 point. >> and hour top story, jpmorgan, disclosing a trading loss of at least $2 billion from that failed hedging strategy. ceo jamie dimon apologizing on a
conference call with analysts last night. take a listen. >> in hindsight, bad strategy, bad execution, obviously the environment. these are market to market positions. i don't want to make excuses and talk about markets because that's usually just an excuse. >> he conceded the losses were linked to a wall street journal last month about a trader nicknamed the whale. as for whether this is a jpmorgan issue or a broader issue, take a listen to this exchange from the conference call. >> would this be a jpmorgan specific issue or would there be a chance others have losses? >> just because we're stupid doesn't mean everybody else was. >> shares on jpmorgan have fall i don't know sharply after the bell. we're at about 37.63. the broader banking sekor also
taking a hit as questions are raised we we could find similar problems at other firms. >> let's get more analysis from chris whalen. i don't always share everything i say before break. i said chris is outspoken about the industry before there was a huge screw up. so i can't wait to hear what you had to say today. looks like maybe you're going to be subdued in your criticism? >> look, people attribute magical, super human powers to jamie dimon and his colleagues. everybody fled to jpmorgan during the crisis, the fortress. but what you see on the trading side is that you can't be perfect every day, do you make mistakes and you do misunderstand correlations and relationships that you think you understand. >> in in the course of a bank as bess, this hedging strategy, is
this something that was necessary for the bank to be involved with? should we allow the bank -- should they do a trade like this? >> this is an excellent question. the bank is long security. >> they could be long european corporate debt. >> but they have investments. absent the hedging, they would just get whatever yield on the securities and they would market them to market. they held them to maturity, almost all of these, by the way. it's like what my strategy is on our product. we're basically running some short but you're mostly long. this is what a lot of people in the media don't yet understand is most of this time has been fired. i'm really interested to find out what was going on in this --
>> who was fired so far? >> all the traders. >> the whale is the last one. >> but the question is have -- have the proprietary trading, has that just moved into the cio department? >> potentially but the volcker rule makes that very difficult. that's why you're seeing this chang. the lawyers came in and said we understand this is the bank's investment portfolio, not anywhere near sales trading, you have to understand these people work for the cio. these people were effectively market makers in most of the securities i care about and now they're gone. >> you commented after the crisis everybody moved their money to jn. obviously it is still fortress balance sheet. does this change your mind in terms of the pecking order of these firms? >> no, it little straits how little visibility we have,
whether you're talking about the investment book or sales trading, whatever it is. people make mistakes. you're rolling the dice every day. >> what about this market-to-market issue? it seemed to be reflected in the call but maybe it wasn't. >> it looks like we have a structured credit product. until we have more details on exactly what it was, we don't know. this raises the other issue i wrote about this morning, i put a post up on zero hedge, the lack of transparency and complexities of these makes it almost impossible to to hedge and to pro district. if i'm long corn, i know what the basis is. there's no ambiguity. j t they large. you're looking at them that to
me a real away from this. >> it's a huge concern and it raises all kind of questions about what the banks are doing. >> the natural business, if you just look at deposit taking, lending, the branches, it's not that profitable. the large banks make up that difference by rolling the dice. if you look at a -- they have a -- because the top nour have to make the earnings points. >> a lot of banks are keeping a ton of money still at the federal reserve. they have to put this money somewhere. >> they do.
the fed is encouraging the reckless behavior. if you're a bank manager, you have flat results and falling margins. if you're the cio, becky, the almost -- >> jamie called this sloppy. do heads roll and which head roll if they do? >> i think someone is going to get -- that's what i've been hearing for the past couple weeks. >> you had heard someone was going to get shopped -- >> what can i say in i write, too. you can't have my sources, i can't have yours. >> knowing that means somebody more than the volcker rule. we have to focus more attention on the media on this. the lawyers read the statute and we don't even a readium and we
have greatly reduce amount of all tactical trading around the investment book of the bank, which is crazy. >> that's going to make a big, big difference for the bank's customers. already wick ridity is very low. if the regulators run with this jobban thing now, it's we set ourselves up on a really nasty day because all the big firms are broken up. if we do have a bad day and tim gait wants the big banks to come in, at the -- >> they can't do it. >> be careful what you wish for. >> will banks have a harder time making their numbers to be profitable, from now on.
>> if you look at the hedge fund we've been working on, 70% of it comes from the securities, the other 30% or so has been tactical trading around the book. >> do you think it's different than yesterday, the final volcker rule and -- >> well, sure. if you're regulators you have to -- i think the volcker rule is -- >> if we put glass-steagall is back? >> if you bring back glass-steagall, you have to wonder about liquidity. >> i don't like the large banks. i'd remember be up the structure
and the paid and less than foily and else. they were saying the reason for all the income and equality is the financial secondor in the happen and it gets corrected naturally. >> so we've already seen a lot of people that have been debanked because of that. >> and a lot of banks that have dropped listings, too. wall street is not going to research. >> so much of our economy isn't people trading around paper. >> let's really i think distinguish between raising money for the bank to sell to homeowners.
if you're going to trade around the book and create a short strategy that is essentially the counterpoint to your law i respect the way he presented his comic today and we're all sitting on the 'tis being having a clar zone bus everybody -- >> does the stock market need the evening expect are? >> that's the key this evening. >> the one this evening i'll say about his presidency the last four years. egg nor all the fraud on wall street. let me just pull your mic off. i saw you do that. >> how did that come off? it just magically dropped off? lower your feet. >> one thing that i want to say
that i think is truly extraordinary is to listen to jamie dimon on that wall. he didn't try to sugar coat it. he told it like it is. that's what i find so refreshing about him is that when you talk to him, either see him in public or talk to him in private, you feel you're really getting the true story from him. >> it's not that he's going to make a mistake and biggie is the other one this. >> does he know what he's people are doing? >> but do you give him credit to owning up for it big time. >> yes, you have to meet him. >>. >> i'd like to know when they first understood they had the loss. to put it in expectative nchs. >> that's right. very good point.
so, given, it's a big jp morgan is a very good institution. at the top what was the financial sector's percentage, it was like 20. >> it would be wear out of whack. i think it would be joel le la. >> that's not goodnessly. you want the rest of the economy to grow. i think we'll see that. this whole era of globalization i think is going to go by the by. people are going to want to focus on national esh use and produce that here. i think we're going to get away from this motion of bl-- look,
these people are trading this book in london and everything else. you saw the front line series where they were talking about all the kids that they created, there credit california. and now it comes to buy them. takeaway as i was all these nets. >>ing that, s. >> when we come back, the coveted ham, we'll put it to the test and see what all the fuss is about. and siri, the voice of apple's iphone. you can watch this eventually on cnbc.cop [ horn honks ]
beating consensus. current quarter sales will exceed street expectations and the company says newly launched desktop products have been very successful in their work. also, shares of gilead sciences moving hire after an fda panel says their hiv drug should be approved. it already in use for treating hipv patients. and scott thompson saying he never provided a resumé or incorrect statements to the company. also according to a wall street journal story by cara swisher, he was in interview where he was asked about this and talked at least about some of these issues. we had jeff sonnenfeld on earlier today and heap still
says that is a serious question. european equities this morning as can you see also in the red. the biggest drop may be coming there in athens, down 23.36%. argentina's government slapping restrictions on import of insurance hands. is it another insult. michelle caruso-cabrera is here with what this means on a grand scale. >> she brought us ham. >> it's going to be delicious. spaen is living an awful week,
horrendous week. argentina launched a huge insult across the pan by banning the import of spanish ham. you have to understand that ham in spain is big. it's the combination of turkey on thanksgiving, hot dogs at a baseball game, multiplied by thousand dollars. it not yet ham every toongle day. porkers. there's a huge trade going on. this is making news when they're talking about nationalizes the banks. it coincides. it co exist. we have brought you the most expensive span, ham you can get. $160 to $200 per pound.
this plate of ham would cost you $150 minimum. only black pigs that are fed acorn. >> they're fed little acorns. they sometimes call it black hoof. >> it's really good. >> you like it? you a ham eater? >> i am. >> i can't tell you what it seems like because i don't think i can. >> do not call it pro sciutto. >> you can buy a cheaper version that's own $8.20 per pound here in the united states. there's only one or two slaughter houses in spain that have been approved by the saudi arabia to bring it into the
united states. >> it a greasy, that's why it tastes good, andrew. >> i don't eat ham. i'm still like in a wood' al i don't know movie where i'm watching the rabbis eat the bakon. >> there's a theory about why spaniards each so much ham. it was to find your religion sew you would try to prove you're one or the other. >> i like it. >> thank you. >> you're welcome. >> a little fatty but really good. more today's top stories 8:30 eastern. see the producer price index. it's been going to bring the numbers and instant market reaction. >> still ahead on "squawk box,"
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jim tisch, our guest host, thank you for that information. you have seen the futures down under a little bit of pressure, about 50 down for dow futures. you have to strip out where fair value would leave them. rick santelli joins us with those numbers. >> down 0.2. not what we expected. if you strip out food and energy, it is what we expected, up 0.2. and up 2 -- i'm sorry, i apologize. it's 2.7, we're expecting 2.8. so that's what in line.
the headline number, including food and energy really is the number that the market's going to pay most atongue two. and you can see why that number moves the way it did. did it have a huge impact on the ek quits? >> as becky pointed out, we're down 5. we had 175.10. the dollar index, not much change and we'll continue to banter all day of course about the jpmorgan trade. a lot of people down here, the first word out of their mouth was feds. >> just if you supply easy money to the big boys, this is what happens, they put it to use. as your one guest purportedly said as i was getting e-mails, they got great respect from mr.
whalen down there. the fed's guilty on so many front. they had to enhance the returns they were unhappy with why the are returns on many of these fixed income products down here? or they get the financing to trade around it, we know where that came from. i'm not saying you don't really respect human nature and how people behave when you benefit them with things that aren't rnd the way this everybody else earns them. if they were like the people who can't get the money to reify their houses, which is what this money was supposedly for, they would treat it with great respect. >> the federal could be partially to blame for all of this because the fed was leaving
these rates low. they're trying to get the banks to use that money. if the banks don't find suitable loans, i have everybody in here, designed to mitt i kate -- when the car doesn't work the -- it's a little too simplistic. >> that's what i said, it too simplistic bhap said was if it the fed's fault, it's the fed's fault. >> what they were hedging was reaching for yield. they were hedging saying they are buying usual debt for yield and then he had to hedge. that's where the reaching was. >> right. >> you know all that. since when are you skag question that you know the answer to?
>> you you guys pointed them out reaching for yield -- >> no, reaching for yield -- >> stupid hedging, that's what he said. >> original stuff they were buying for yield and then trying to pin miz the risk they were hedging out. goldman's got control and traders have talking about except for goldman isn't use org people's money that is questionable that many believe the way the relationship was with mf with regard to customers number and the price of risk. they're out of whack, the positions they create are out of whack. >> first of all, my criticism of the fed is what happened in the stress test? i haven't heard too much talk
about that. it goes to mitigating the bank risk. i think the fed would probably point out here at the end of of the day this trade is not going to bring doubt. >> i'm not saying i disagree with that that this is a reaching for yield situation. >> what the goal was here was to try to get a risk-reward profile that was stretching the imagination. as for the ver baitem questions, it's that we don't know what increddents to this joyce were. we don't fwho how it going to -- i can't already working about the ppi very wickly, if you look
up the chain to, a lot of declines there. let me go back to the finish here. residential gas down 3.1, gasoline down 1.7, that's the whole energy complex. have i those charts i gave enough the back on the decline in commodity prices. that i think is showing up in the raw area here. it's a question i think about consumer prices which we get on tuesday but i think the bigger question is profitability. if companies can maintain their prices, this would be a good factor for corporate factor ability in general. >> rick, steve, have a great weekend bo
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points. back on the losing side of things. we had a brief respite, i guess, yesterday. not a big one but after six straight days -- that would be seven out of eight. we're down a day. >> maybe things will come back. >> our disruptor series showcases the young innovators changing the world of technology. today we'll bring you one of the people who discovers and funds the disruptors. it was the first investor in the siri technology, in gooding and give us a story on siri.
>> that was a great one. i got to know the team there, both on the entrepreneur side and the technologist side and just fell in love with it. the thing that he had had solved was something we have all dreamed about for many years. >> was it obvious to you at the time or did it tack a little bit of imagination? it's one those thingsewhere the solid approach and make a demo and you fall in love can the team. up write a big check and you pray and obviously it worked out well. >> when you first made the investment, what was your thinking as to how they would generate revenue? >> i think the primary thesis is siri, the idea is you have something in your mind you want to go down, you talk to your phone and it done.
so you arj any ally -- when you insert yourself in the line, you get a percentage that. apple is a little harder to monetize but can you imagine more frequent. >> given the success of siri, given the success -- uber is one of yours. you can hail a town car literally in new york, you just press the button it, picks you up. no money changes hard. a credit card does it. >> it's german. >> what i'm curious about is how
much are you focused on apps now? >> on apps, you can get something launched toin and get tractions. you can just write an and launch and get out to aful of test merce joe neat opinion pit e eye -- tell us about the next disruption that we should be pay ago tense to. >> a huge one that's coming is internet video going mainstream, one that you eluded to earlier, it's a lashlg investor called coku. it takes all the internet video and bring it is to your television. they've been kind of a quiet company but now they're in all retail distributions. >> we're owned by comcast.
does it meet immediate the cable company. >> we love the come tech offering doesn't not come player to theful, hulo, netflix, suppo it's -- >> give us the one mea culpa, the one that you wished you'd been in and what was wrong with your thesis? >> actually, it ends up being which ones you don't chase really hard. the best deals are the ones that don't go fund-raising, people are knocking on their doors all day long. it's phase book.
i foug i wish i would have heard mark zuckerberg's thesis back then. >> will you buy into the ipo? >> i will. >> shawn, thank you for being here this morning. appreciate it very, very much. >> coming up, we'll get cramer's take as well as we head down to the new york stock exchange. stick around, we'll be right back. down to the root. without harming your lawn. guaranteed. ortho weed b gon max.
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welcome back to squawk this morning. jamie dimon taped an interview for "meet the press." did that on wednesday. don't expect to hear anything about the company's $2 billion trading loss. he taped the interview but couldn't get the comment on the loss. he called the host david gregory yesterday to apologize. david joins us live. give us the back story of what transpired this week. >> this was an interview that we had prepared that was in concert with the global cities initiative that jpmorgan was doing in ohio. i was there as part of that
event to interview him and we interviewed him before the program to talk about the broader economy and politics in washington, the president's performance and, you're right, then the next morning much to my surprise, we see this disclosure that the bank made. as you mentioned, i spoke to jamie dimon, said he was just o not able to make the disclosurein the course of the interview. but he was very forthcoming, saying there was no question there was mismanagement in one of our hedge, he was embarrassed, working hard to fix it but said this was a big time screw up in his words. he said it was only going to speed with the issue of how regulators want to deal with wall street. >> i'm curious on that count, he's been one of the most outspoken, knowing that he had these losses on the other side.
h did he talk about any of those conversation with him about politics and the broader economy. perhaps a little bit more broader base than you might have with him here on cnbc when he appear ins some of the more detailed aspects of derivative trading and regulations related to that. but he was certainly as critical as he's been. what he sees as a lack of leadership and a coupumulative effect. i asked him is the economy better off now than we were four years ago? he says while he thinks there's a lot about the economeconomy, thinks that it could have been much stronger but for the regulations and the approach to wall street and even presidential level decision-making. >> you mknow, david, he was on
"squawk box" back in january. he said i'm still a democrat barely. he's been incredibly out spoken. was it that same level? >> not reigning in and making an argument. while he's very clear he was a democrat. he's not allowed to support anyone politically in a presidential race. he has been, you know, disappointed. he makes the argument that frankly mitt romney makes which is, frankly, that the president has done the best he can on the economy, but it could have been stronger. he doesn't specifically say that the president is in over his head when it comes to the economy. he doesn't go that far. but he certainly thinks that whether -- he's a big proponent of simpson bolts and think that is washington knows way the answer is in order to get the government's fiscal house in order. skbl hey, david, did you invite him on live on sunday?
or did you want to visit him maybe? could you have done like an addendum to the -- like an update on the interview? >> no, we had tried. >> yeah. that's what i meant. so you asked and he scad -- oh, absolutely. bebelieve me. i would like to follow up. >> are you going to run the interview? sfwl >> i want to see the tone himself. >> how is it going to play. you've seen it and how do you think it's going to play on sunday? >> well, i mean, i think, look, he's an out spoken figure. and when he talks broadly about the economy and about the financial markets and about america's view of wall street, about occupy wall street, and i think he's, you know, he's out spoken but he also speaks with humility about what wall street and what he believes is accountable for and how to move forward. and, as i say, this is an issue
when, you know, he recognized, and i think his public comments yesterday, when a mistake like this happens of this magnitude, that the regulators, washington figur figures, politicians have new for the mill. >> well, david gregory, our fer special thanks for being here. we will keep our eyes on that show on sunday. >> let's get down to the new york stock exchange. jim joins us now. we saw him a bit yesterday, jim. feel the same way today, yeah? >> well, i've got to tell you. i was listening to david and i'm also conscious there was a moment to the conference call. where jamie diamond is apologizing to guy. guy can't hear about how he did not reveal to the analysts even in a backgrounder that this loss had occurred. this would have been terrible for diamond. he had to disclose both because
of david gregory. there was just no choice. this had to come out. it's really embarrassing. >> i read that. i did not hear that, but i did read though comments. what was guy ohs response? he kind of said okay? that's okay or something? >> guy is a gent. he could have ripped off diamond's head very easily. and these people are very respectful of diamond. he deserves that respect, perhaps. but i've got to tell you, jamie diamond has become the manchurian candidate for regulation. if you wanted to have the hardest regulation as possible other than electing elizabeth warren, he has now succeeded. >> which is -- we talked abthat. if ambru was going to write a fix, a sequel, this is how you'd write it. it's so rich with irony. >> yeah. look. this is a terrible conference call. and i know that we're all going
to say -- let's say how contrite jamie diamond was. i don't care about contrite. you can tell us all you want about how you didn't have any risk. you know what my take away is? you were stupid and you were agree joss. >> all right. to his credit, i will adebré with jim except to say that to his credit, he did say we were stupid. but the take away is that if you say you're stupid, you're going to be acquitted. so you know what, maybe you are stupid. maybe you're just not in control like i thought. and i think that the message, if you listen to the call, it's kind of like, hey, listen, guys, i kind of got it wrong. no, no. you told us one way and you're not in charge of your bank like we thought. and i want to go and own another stock because you obviously didn't know what was going on, even as the wall street journal did know what was going on. >> they're yelling at us that we have to go.
but how much premium was built into that stock? >> well, as much as we'll take out today. >> all right, thanks jim. coming up, some final thoughts as james tisch, president and ceo of lows affidavit the break. at liberty mutual, we know how much you count on your car, and how much the people in your life count on you. that's why we offer accident forgiveness, where your price won't increase due to your first accident.
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welcome back. welcome back. final thoughts right now from our guest host. jim, why don't you put this $2 billion loss from j.p. morgan into context for us? >> as i understand what happened, j.p. morgan had about a hundred billion dollars of sovereign european debt. to hedge it, they entered into credit default swaps. and what probably happened is the basis moved against them. now, if it's a hundred billion, in order to lose $2 billion, that's 2%. that's not really a big amount. >> although you could criticize them for allowing a hundred billion position to be built up. >> and i don't know why they had that position. but probably the biggest crime would have been if they hadn't insured that in some way and those sovereign debts had gone against them in a major way, they could have lost a lot more than the $2 billion that they